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Builders going Bankrupt

By
Real Estate Agent with Sibcy Cline Realtors®

  With the number of builders in our area going bankrupt it causes me some concern with the standard builders contract. The builders contract calls for a nonrefundable deposit to be paid to the builder upon acceptance of the contract. This money does not go into an escrow account but is commingled with the builders opperating funds.

 What protection are we giving our clients if the builder goes bankrupt? There have been enough builders in my area to go out of the industry in the past year to make me think this over.

  The deposit money needs to be placed in a brokers escrow account and held for disbursement at closing. The buyer should not pay for upgrades as they go along but have them made as change orders and up the purchase price with an addendum to the contract.

  The builders may not like it but who do you represent the builder or your client? 

  With the deposit money held in an escrow account it would not be in the builders funds and if something happens to the builder the money would be available to be returned to the buyer.

  I sure don't want my buyers to end up with a wonderful newly built home that looks like this.

 Thanks a lot and any thoughts you have would be great to hear.

 

www.Find1Home.com

 

Rich Kruse
Gryphon USA, Ltd. - Columbus, OH

My assistant bought a home from Dominion last year.  As everyone in this area knows, there have been some suspicions about their ability to continue on.  Their answer to me keeping the escrow was basically that they get the money or they don't build the house.

I agree with your position, however don't know how successful you will be.  You have good reason to be concerned though.  I have been involved with about 6 distressed builders and all of them spent the deposits but didn't finish the house.

Mar 25, 2007 01:35 AM
Diane Bell, Hilton Head Real Estate, Bluffton
Charter 1 Real Estate, Hilton Head, Bluffton, SC - Hilton Head Island, SC

An excellent post......that's the tradition with most builders and I have to agree it is problematic in tough times.  I just spoke with a Realtor in Ohio  last week and he relayed how slow the market is in that area.  As Realtors we need to protect our buyers......Thanks for posting this!

Mar 25, 2007 01:40 AM
Anonymous
Kelli Roddy

I have a different kind of problem, I have clients that are looking to buy up any subdivison sites and finish them in the Clearwater Florida  (St Petersburg/Tampa/Cape Coral) and I am searching for any leads I can find on how to get ahold of banks or builders that are in need of getting these bought and built/sold. If anyone has any info in the Florida area please email me.I am a Real Estate Broker and need to find help for my clients who I have moved away from but still look to me for help!! They are great Clients and Strong buyers forsure!!!

 

Thanks so much!

Mar 23, 2011 02:10 PM
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